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If the brokerage subsidiary of the City's banking services bank is used, any security purchased for it <br />must be safekept in the bank's trust department to fulfill DVP requirements. <br />Banking institutions may be used for City time and demand deposits. These depositories will <br />continuously provide their most recent "Consolidated Report of Condition" (call report). The City <br />may also utilize third-party rating agencies in order to assess the overall financial strength of <br />potential depositories. <br />X. AUTHORIZED AND SUITABLE INVESTMENTS <br />Authorized investments under this policy shall be limited to the instruments listed below as <br />authorized and described by the Public Funds Investment Act. <br />1. Obligations of the United States, its agencies and instrumentalities, not to exceed two <br />years to the stated final maturity, excluding mortgage-backed securities; <br />2. Direct obligations of the State of Texas or its agencies and instrumentalities, not to <br />exceed two years to the stated final maturity; <br />3. Other obligations, the principal of and interest of which are unconditionally guaranteed <br />or insured by the full faith and credit of, the State of Texas or the United States or their <br />respective agencies and instrumentalities, not to exceed two years to the stated final <br />maturity; <br />4. Obligations of states, agencies, counties, cities, and other political subdivisions of any <br />state rated as to investment quality by a nationally recognized investment rating firm not <br />less than A or its equivalent, not to exceed two years to the stated final maturity; <br />5. On City's reserve funds, the above investment items may go up to five years to the stated <br />final maturity <br />6. Fully collateralized certificates of deposit, not to exceed two years to the stated final <br />maturity, issued by state and national banks doing business in this state that are: <br />a. Guaranteed or insured by the Federal Deposit Insurance Corporation, or its <br />successor; or <br />b. Secured to 102% by obligations that are described by Subdivision (1) - (4) of this <br />subsection, but intended to include all direct agency or instrumentality issued <br />mortgage backed securities passing the bank test; and <br />7. Fully collateralized direct repurchase agreements having a defined termination date, <br />secured by obligations described by subdivision (1) of this subsection, safe-kept with an <br />independent third party selected or approved by the City, with an executed master <br />repurchase agreement, and placed through a primary government securities dealer, as <br />defined by the Federal Reserve, or a bank doing business in this state, not to exceed two <br />years to the stated maturity; <br />Flexible repurchase agreements (flex repos) are authorized for investment of bond <br />proceeds, if secured by obligations described in subdivision (1) of this section, safe-kept <br />with an independent third party selected or approved by the City, with an executed master <br />repurchase agreement, and placed through a primary government securities dealer, as <br />defined by the Federal Reserve. The term of the flex repo may exceed two years but not <br />exceed the anticipated expenditure schedule of the bond proceeds and no party involved <br />with the issuance of the debt shall be involved with the funds reinvestment. <br />City of San Marcos Investment Policy Page 5 <br />